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According to the Council of Mortgage Lenders, (CML) gross mortgage lending in December 2011 was an estimated £11.7 Billion (GBP).

That is still 12% short of the £13.2 Billion (GBP) recorded in November 2011 but is actually up 12% when viewed on a year-on-year basis.

In fact UK mortgage lending increased to around £140 Billion (GBP) in 2011, compared with £136 Billion in 2010 and December 2011 was the fifth month in a row to show annual growth in mortgage lending, with 2011′s fourth quarter total of £37.3 Billion (GBP) up 11% on the final 3 months of 2010.

However, the CML expects the UK housing market to experience a weak first half of 2012 and warns that the increase is from a low base with challenging economic prospects,.

The Eurozone crisis, higher funding costs for lenders and the troubled state of household finances are all likely to impact on the UK housing market.

Bob Pannell, CML’s Chief Economist, said “There is a glimmer of light ahead for households in that real incomes could stabilise and perhaps even start rising by the end of the year. But, continuing Eurozone problems mean that mortgage funding prospects are uncertain, so overall UK mortgage market conditions for the year ahead remain difficult to call.”

Europe want control of UK mortgage lending

European Union Want To Regulate UK Buy To Let Mortgages

Eurocrats no longer concerned with the current Eurozone financial crisis, are sticking their noses into the UK Buy-To-Let mortgage market, with the proposal of a new EU Directive on credit agreements relating to residential property, formerly known as responsible lending and borrowing.

UK Landlords who had been investing in property prior to the 2007 credit crunch have witnessed the dramatic fall in the number of buy-to-let mortgage products made available since the peak of the market in July 2007.

Today (NOV 2011), investors only have access to a paltry 15% of the 3648 buy-to-let mortgage products that were available before the full impact of the credit crunch.

Now, to make matters worse, the European Union want some form of control for the UK Buy-To-Let mortgage market, as part of their proposed directive on credit agreements, reducing the already limited range of UK BTL mortgage products available still further.

The EU has set out plans to include UK Buy-To-Let mortgages with this regulation, changing the way property investors and landlords are assessed by lenders for their BTL mortgage loan.

Currently in the UK, the affordability of a Buy-To-Let mortgage is measured individually, by assessing the rent generated by each property against financing costs.

Typically a mortgage would be considered affordable by the lender if the gross rent covered between 120 – 135% of the finance cost of the mortgage.

This excess cover is meant to ensure that even if the interest rate rises or the landlord suffers a rental void they are still be able meet their mortgage obligations in the medium term.

In general it is a sensible system that aligns the affordability of the finance to the cash generative qualities of each investment property.

It also allows landlords on modest incomes to be able to purchase a property without having to rely on a substantial personal income to prove they can manage their investment.

This method of measuring affordability was only introduced in the mid 1990’s thanks to a number of lenders getting together to introduce the Buy-To-Let initiative to the property investing public.

Now, Europe wants us thrown back into the pre BTL lending dark ages.

The European Directive proposes that BTL lending will be regulated in the same way that residential lending is at present.

Under the new proposals, lenders will no longer be allowed to take into account rental income when assessing the affordability of a buy-to-let loan. This would have massive implications for the 1.3 million small landlords, many of which could face difficulties in refinancing their loans under the revised criteria.

The proposals are to be voted on in early 2012 and would become law by 2013 but who is the legislation trying to protect?

The latest figures from the UK buy-to-let mortgage market show that the current system is actually resulting in a lower rate of arrears on buy-to-let loans than on residential loans. (Currently 2.14% compared to 1.91% for buy-to-let loans).

These new European directives go against current UK thinking, with the Council of Mortgage Lenders, (CML) against regulation and institutions such as the Building Society Association are completely against the new European proposals. Even the UK Treasury examined the need for Buy To Let regulation 2 years ago and decided against taking any action.

The new European Union mortgage directive is primarily concerned with the protection of consumers and including buy-to-let is unjustified.

A buy-to-let mortgage is a commercial transaction and most landlords have enough knowledge and experience to make business decisions without protection from the law and without evidence of detriment to the consumer it is unnecessary to impose such a limiting European regulation.

 

With the turmoil created by the Billions wiped off global share prices over the last week or so, I wondered how it would affect the UK property investor?

Italian and Spanish investors have seen money market interest rates shoot beyond 6%, amid fears that their respective economies are about to crash into recession. Meanwhile the reverse is happening in the UK, even though some tipsters are still predicting that the UK is facing a “Double Dip” recession of our own.

Short-term money has become cheaper to obtain, as markets now think the Bank of England won’t raise interest rates until well into 2012. This is great news for investors who are using bridging finance in order to complete property purchases.

In the past few days UK banks and building societies have been rushing out rate cuts on nearly all their deals, so if you’re coming off an expensive fixed-rate mortgage you are one lucky investor!

However, the new financial crisis is more bad news for first-time buyers, effectively they are being shut out of the market by lenders demands for substantial deposits.

This is unlikely to ease any time soon due to the continuing uncertainty over the state of Eurozone finances and globally banks are trying  everything they can to preserve their capital.

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The availability of mortgage finance to UK buyers in struggling Eurozone countries has reduced significantly in recent months – with lending for holiday homes in Greece and Portugal hit the worst.

According to brokers, mortgages for second homes in Greece, the country at the centre of the Eurozone debt crisis, are currently non-existent.

Most international and local banks are no longer lending to non-residents as a result of the country’s deepening financial / debt troubles, although it may be possible to secure finance direct from a Greek bank.

In comparison, there are a number of banks that are still lending on Portuguese property. However, mortgage rates in Portugal have rocketed upwards this year – particularly on remortgage cases

Lending for mortgages in Spain has remained stable, according to mortgage brokers, with rates only increasing in line with the euribor rate.

For Britons seeking a French mortgage, though, there are more finance options and lower rates than in the Countries most affected by the Eurozone crisis.

While some banks had previously tightened their lending criteria due to concerns about exposure to the Greek debt crisis, this is no longer the case.

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